Strategic Planning And The CFO: How Do They Relate?
Over the years, the role of a CFO has evolved with the expectation that they will have both financial and strategic skills. In practice, it’s rare to find an organization where the CFO has no strategic role to play. With that being said, there has been an increasing focus on the strategic roles of CFOs. This article looks at how CFOs approach strategic planning and how the strategy development process works for them.
Strategic Planning Components for CFOs
Strategic planning considers the short-term and long-term performance of all aspects of the organization, including profitability, revenue generation, and growth. For CFOs, four components are integral to strategic planning:
Traditionally, finance leaders focus on revenue management as a significant component of their strategic focus. The concept of managing revenue provides a way to protect the value of products that have already been developed and increase revenues and offset production costs.
However, CFOs are also focusing on new revenue models, such as recurring revenue and new revenue streams that are complex and sophisticated. For example, major technology companies such as Apple and Google create products that fall under different categories, such as hardware, software, and services.
The concept of managing costs is another crucial aspect of strategic planning for CFOs. Cost management enables organizations to use a combination of frontline and back-office expenses to achieve their goals. The increasing impact of digital technology, such as cloud computing, on the cost side is also changing the dynamics.
For example, one of the significant components of a strategic plan is the ability to close a financing deal. Strategic planning should include monitoring operational costs to ensure that the investment is protected and the project is under budget.
3. Human Capital
Human capital is a crucial aspect of strategic planning for CFOs. In the early stages of the project, organizations need to focus on the composition, skill sets, and performance of their human capital. CFOs must understand the human capital and the roles required to achieve the project objectives. During the project, the human capital might need to change as the goals of the project evolve.
CFOs must constantly evaluate the competitive landscape, including the company’s competitive performance or project against the competition. This competitive analysis should be done in conjunction with a competitive benchmarking tool to determine how the project is performing and if any competitive issues need to be addressed.
Why Strategic Planning Is Important for CFOs
Each of the four components of strategic planning is vital to help achieve the project objectives. CFOs need to understand their roles in the strategic planning process. Strategic planning aims to ensure that the organizations are constantly addressing the challenges and changes in their environments and that the organizations can make decisions aligned with the strategic goals.
Partnerships between the businesses, finance, and technology leaders, as well as the use of a robust and strategic planning process, can help CFOs strategically and effectively manage the financial goals of their businesses.
It’s an exciting time to be a CFO, as they play a crucial role in strategic planning. CFOs are responsible for creating future plans and communicating with the business to develop key strategies and goals. In addition, CFOs must be able to engage with technology providers to create systems that incorporate innovative solutions.
CFO Strategies is here to provide CFO and financial controller services on a permanent part-time basis to businesses. Our CFO services are ideal for companies that want to focus on their strategic growth and need help managing the financials and reporting. CFO as a service is designed to help solve your organization’s financial challenges and give you insights into your business like never before to help you reach your business goals. Contact us today to get started.